In-house vs Outsourcing Software Development: What to Choose in 2024

If you can’t decide whether you should develop your app or website in-house or outsource development, you’ve come to the right place.

In this article, we dive into the in-house vs outsourcing software development debate. We’ll review your mobile and web development options, cover their pros and cons, and offer comparisons.

Outsourcing vs In-house Software Development Models

First of all, what are the outsourcing and in-house software development models?

In a nutshell, in-house software development means you hire a team of employees who are part of your company to develop your website or mobile app. Usually, this means hiring specialists one by one, through job boards and LinkedIn profiles. In theory, it’s possible to find and hire a full in-house team at once, but in reality, it’s a bit of a unicorn occurrence.

When you outsource development, it means you contract with professionals outside your company and don't hire employees. You can choose to outsource app development to a company or to freelance developers. Companies usually offer both separate specialists and full-stack teams depending on your needs. You’ll likely need to hand-pick freelancers one by one.

IT outsourcing and in-house development are both popular models with their own pros and cons. The following is our breakdown of the arguments for in-house web development vs outsourcing web development.

Advantages of in-house software development

When it comes to creating proprietary software, the advantages of in-house software development are:

• Close control over the development process

• Unhindered communication

• Understanding of business goals on the part of developers

• A team dedicated solely to your product

• Flexibility

Let’s go over each.

Access to a pool of 26.9 million world-class developers

We all witness the software market evolving at breakneck speed. Within six to ten months of software development, chances are you’ll have to change something to meet new market requirements.

For this, you might need to hire additional developers which means getting stuck in the tedious hiring and onboarding process. Alternatively, you can make your existing developer learn the new required thing, spending time and possibly missing the window of opportunity to be among the first adopters.

Since software development outsourcing teams work on versatile projects, they tend to have seasoned specialists for all intents and purposes at their disposal.

Close control over the development process

An in-house team resides where you and your employees work, which makes it easier to reach them. Even during the pandemic, an in-house team will still be in the same state or country, at the very least.

You can monitor your team regularly when they’re a couple of offices or an unscheduled phone call away. You’ll always be able to drop by — physically or digitally — to see how the project is going, ask questions, and suggest changes.

Unhindered communication

Your in-house team speaks your language — both literally and figuratively. The opportunity to meet and discuss the project face to face at any time, without complex arrangements, makes it easy to clearly communicate your ideas.

Understanding of business goals on the part of developers

The job of outsourced third-party contractors is simply to build a product the way a client tells them to. While there are companies that value their clients’ businesses and don’t blindly follow instructions, not all outsourcers are like that. And nothing beats a team whose own future profits depend on the product’s success.

An in-house team is immersed in the company’s business and shares the corporate spirit, so in-house specialists are usually dedicated to the project.

Besides, some inside information that might affect a product can’t or won’t be shared with outsiders.

Dedication to your product

Most outsourcing developers, whether companies or freelance specialists, juggle several products simultaneously. When one project is in the low engagement stage where little needs to be done, they’ll take up another, since they’re usually paid for hours worked.

In-house teams, on the other hand, dedicate themselves fully to the software they’re building for their employers. With an in-house team, you won’t encounter a clash of schedules when you want or need to urgently implement changes.

Flexibility

In terms of software development, flexibility means the ability to make changes right away; it’s one of the big in-house software development advantages, and it stems from all the benefits above. In-house teams have more flexibility because they’re:

• More geographically accessible

• Better able to communicate with the product owner

• Involved with one product only (or several, but for a single company) and don’t need to re-adjust their schedules too much to make changes

• Able to understand the business well since they see it from the inside

Disadvantages of in-house software development

In-house software development is more often than not used by big companies with software products that are in need of constant long-term development services. There are reasons for that, and you’ll need to keep some things in mind when you choose in-house software development:

• It costs more than outsourcing development

• You’ll need to find and keep talent

• You’ll need to think about upskilling and innovation

Higher costs

When you outsource software development, you pay developers only for the time they work on your product. The cost can be based on worker-hours or story points, but either way, you pay for the work done and nothing more.

For an in-house team, you’ll not only have to pay salaries (and competitive ones at that) but provide a social package — sick leave, vacations, holidays, health insurance, etc. If the team works from your office, you’ll also need to provide high-end equipment. Developer-grade computers don’t come cheap.

Finding and keeping talent

Building an in-house development team can be a challenge, especially if you’re not operating from an area with a strong software development industry. And while Silicon Valley isn’t the only place where talented developers reside, not every region and country has a strong IT presence.

Hiring developers to relocate to where your offices are might cost an arm and a leg, and very few specialists are willing to relocate somewhere with little future prospects.

Besides, to keep developers working for you, you’ll need to offer benefits on par with or above the industry standard. This can prove unprofitable when development enters low-load stages.

Another difficulty may arise if you have no experience in IT. You’ll need to consult professionals to know what kinds of specialists you need and what experience they should have.

Upskilling and innovation

It’s not uncommon for professionals working on the same product for a lengthy period of time not to keep up with the latest innovations in the industry. That’s because in an in-house team, developers have little to no competition and, hence, little to no motivation to educate themselves unless they’re passionate about their job.

In this case, it falls upon the employer to motivate employees and pay for their education and upskilling as well as for upgrading their equipment so it’s compatible with the latest technologies.

When to Choose In-house Software Development

Considering all the advantages and disadvantages of in-house development listed above, we’d recommend hiring an in-house team when:

• You have a long-term project that will require constant work from developers
• You have no financial restrictions and would like total control over the development process

Advantages of outsourcing software development

More and more companies are choosing to outsource all or part of their software development. Even Google outsources parts of their products. Outsourcing is a sensible decision for:

• Saving money

• Launching faster

• Accessing a wider pool of specialists

• Promoting team education and innovation

• Ensuring skill versatility and team scalability

Saving money

Whether you hire an outsourcing web development company or separate freelancers, they’ll already be equipped with everything they need to get the job done, including a workspace and equipment. No office-related costs will be on you, which will cut your spending significantly, especially if your project is relatively long.

Additionally, when there’s a decrease in activity within a project, you can put the project on hold and come back to it later with the same people working on it (granted, you’ll have to negotiate with the team beforehand). With in-house development, you can lose your employees to other companies when there’s no work for them, and luring them back will be far more challenging.

For example, we estimated that developing an Instacart-like delivery app in the US with an outsourcing company would cost at least 20% less than with an in-house team. More significant savings happen if we change the location and with it the hourly rates of the outsourced dev team members. This way, hiring an outsourced team from Western Europe would slash the app development cost by 50%, and from Eastern Europe — by a whopping 70%.

Launching faster

Good outsourcers — teams and individual freelancers — usually have several projects lined up. To keep up with everything, they set deadlines and meet them. Besides, most outsourcing agreements include fines for violating deadlines without an acceptable reason. This means that with the exception of some really unexpected circumstances, a team of outsourcers will deliver your project in a timely manner. In-house teams, by virtue of being more flexible with changes and fixes, can fail to meet strict deadlines.

For in-house teams, violating project deadlines is a more common practice than for outsourcers. But in terms of flexibility, working with a local development team is second to none — or so it was believed before the pandemic. With a well-established development process and modern communication tools, managing outsourced development teams now seem as easy as if they were sitting in your office.

Throughout the entire Mind Studios life, we delayed the project releases only for 2 business days.

Being a software development outsourcing team from Ukraine, we managed to develop a 4-app system for the James Butler delivery service in Denmark from scratch just within three months.

Seeing the great capability of outsourcing in helping entrepreneurs make tech products quickly and efficiently, Mind Studios’ founders decided to start their own outsourcing company. Our CEO Dmytro Dobritskiy recalls:

“The main reason for creating an outsourcing company was the desire to dive as deeply as possible into the world of technologies. More so, despite the popularity of outsourcing, we had witnessed that very few companies really embraced the client's idea; many often treated a project as “one more from a pipeline”. We decided to initially profess a different approach and help entrepreneurs and businesses find the most effective solutions.”

Accessing more specialists

When it comes to in-house software development options, your selection of professionals will be limited to your geographical area. Inviting developers from out of state will cost you extra and might prove impossible for a multitude of reasons. If you live somewhere where the IT industry isn’t very strong, finding quality developers will be a struggle.

With outsourcing, you can choose developers from all over the world. You can combine several freelance developers and/or software development companies from different countries for the best results.

For example, when our client came to us to develop a secure messenger for the Middle East region, he planned to code it in Ruby on Rails. Later on, we saw the need to shift to Elixir to make his messenger, a highly loaded system, operate smoothly.

If our client had worked with an in-house team, it could have taken months for him to hire an Elixir backend developer. Working with us, he got this specialist in a flash.

Promoting education and innovation

Outsourcers — both company-bound and freelancers — constantly up their skills. It’s essential for them to stay relevant on the market. Quality software development specialists keep their eyes wide open for everything within the industry that can give them an edge over competitors. You won’t need to nudge them in the direction of new tech solutions or improving their skills, and you won’t need to pay for it.

In-house teams, on the other hand, can sometimes get stuck in the same place if they only work on one product for years. Chances are, you’ll have to motivate your in-house employees to upgrade their skills.

Ensuring skill versatility and team scalability

Outsourcing, especially with a reputable company, comes with the benefit of team versatility. If a certain developer is unfamiliar with a specific technology, chances are there’s a specialist within his or her reach who is familiar with it and can provide expertise without delay. In the same situation with an in-house team, you’ll have to spend time and money on either finding more developers or educating your existing employees.

Disadvantages of outsourcing software development

Despite all the abovementioned pros, outsourcing still isn’t a perfect solution, and it has its own landmines. Here’re the main outsourcing software development disadvantages:

• Lack of personal control
• Poor flexibility
• Possible low quality of code
• Fraud and information theft
• Hidden costs
• Communication issues

Lack of personal control

Monitoring and control are some of the biggest advantages of in-house system development. Direct control over the development process is a bit more complicated with outsourcing.

Usually, if you outsource to a development company, you’ll have a project manager to connect with your team and set times for communication, reviews, and learning about progress. You can agree to communicate as often as you need — daily, weekly, or at the end of each sprint. But essentially, you will control the project indirectly through a project manager.

Poor flexibility

With an in-house team, you can introduce changes at any time and expect your team to implement them ASAP.

Most development companies use an Agile methodology and work in sprints. Agile employs short-ish periods of development (usually two-week sprints) following a pre-approved plan. Unless they fix a crucial bug or implement an extremely time-sensitive feature, changes are added to the next sprint.

Possible low quality of code

Software development is a profitable industry everyone wants to be part of. But, as with any job, it takes time, effort, and dedication to be good at developing software. Sadly, not every developer is dedicated to building quality software for their clients. Some decide to half-heartedly pull together a somewhat working code that falls apart the first chance it gets.

With an in-house team, you’ll have control at every stage to check if things are working. The lack of control over outsourced development can result in noticing mistakes too late.

Finding a reputable developer to outsource your project to might take some time. However, a number of services can help with that. If you choose to outsource development to a company instead of freelancers, you can check companies’ reputations and credentials on Clutch, where all reviews are from verified clients. Job boards for freelancers usually also have reviews and ratings.

Risk of data leaks

Depending on your project, your development team might need sensitive information about your business. You’ll have to take this into account when choosing who you work with.

Turning to reputable developers with good ratings on platforms like Clutch is a good way to avoid fraud and information theft. To further minimize the risks, make everyone privy to sensitive information sign an NDA.

Hidden costs

The software development process is rarely set in stone, and unexpected changes happen from time to time — and will cost extra. With a reputable partner, you will be notified of the possibility of such extra costs when your partner estimates the cost of software development.

What's listed below are things that might cost extra:

• Out-of-turn/unexpected changes
• Upgrades
• Maintenance
• Extra tools necessary to build specific features

When outsourcing, it’s important to factor potential hidden costs into your budget beforehand. It’s a good idea to discuss the topic with your developers and write clauses regulating extra costs into the contract.

Communication issues

Communication between developers and the client can become a serious issue when outsourcing, especially when you work with offshore teams. There can be all kinds of challenges:

• Time zone differences
• Language barriers
• Cultural differences
• Lack of clarity resulting from remote communication

A time difference is possibly the most daunting problem, as it can be hard to navigate. If your team (or part of it) is on the other side of the world, all participants will need to schedule time for communicating, and that time won’t always be convenient. That’s why it’s usually recommended to at least have a team that is within the same country or close enough so they can communicate among themselves efficiently.

Language and cultural differences are usually easier to overcome with careful pre-planning and by finding someone who can communicate clearly both with you and the team. If you speak English, language is rarely an issue today, as most project managers and developers speak it well.

When to outsource development

We recommend outsourcing your software development when:

• You need to stick to a budget

• Your product is aimed at a fast-changing market niche that frequently uses the latest tech and innovative approaches

• Your project will only need occasional changes after launch to successfully keep up with the industry

• Your project doesn’t involve too much sensitive data about you or your business

How to outsource software development

If, having considered the pros and cons of in-house software development and outsourcing, you decide to outsource your software development, here are the steps you need to take:

1. Create a comprehensive outline for your product

   To build your product the way you see it and make it the best it can be, you need to convey your vision clearly. Make an outline to better visualize your future website or app. This outline will also help your team (when you find one) estimate the cost of development.

2. Decide on your budget

   You need to know at the beginning how much you can spend on your product. It doesn’t need to be an exact amount — an approximate estimate will do. Later, you can try to raise more money, but you need to know how much you can spend to prioritize features for an MVP.

3. Consider where you’d like to outsource

   The three outsourcing models are onshore, nearshore, and offshore. Onshore means your developers are from the same country as you; nearshore means they’re from a neighboring country, or at least from the same continent; offshore developers can be from the other side of the world.

   Your choice of outsourcing model will affect your communication with your team: the farther away your developers are, the bigger the cultural differences you might encounter.

   Geography will also factor into the development cost. Developers from the US, being frontrunners in the industry, charge the most. Their rates are followed by those in Latin America, Western Europe, and Australia. The cheapest outsourcing comes from Asia — mostly India. Eastern Europe is somewhere in the middle price-wise.

4. Research developers extensively

   Don’t settle on the first company you encounter. Check out as many as you can. See whether they’ve completed products similar to yours or at least in the same niche, what their ratings are on reputable platforms, whether their clients’ reviews seem genuine, etc.

   Having done this, choose up to five companies that seem the best fit to develop your product and contact them. When communicating with these companies, you’ll be able to evaluate how comfortable it would be for you personally to work with each one as well as their expertise in your niche.

5. Communicate with your chosen developer(s) regularly

   When outsourcing software development, it’s important to pay attention to the development process. Communicate regularly, ask for updates, and check out mock-ups and pre-release versions. While outsourcers aren’t fond of micromanagement, good ones will value your input and will in return give advice to build a better product.

How Mind Studios builds and retains outsourced development teams

Every project comes to us from our business development consultant in the form of a signed contract with an NDA. This means we got a sense of the project, its scope, and the client’s approximate budget. What happens next?

Discovery stage

Discovery stage includes conducting all-encompassing market research with competitor analysis and customer interviews. In our articles about the web and mobile app development process, we emphasize the importance of this stage for any entrepreneur who strives to create a marketable product.

To reach an agreement between a client and a software development outsourcing team, the discovery stage is of utmost importance, too. It enables us to specify the details of what we’re going to develop and therefore, provide our client with a more realistic estimate of the project.

Project estimate

We at Mind Studios often work with projects with ever-changing requirements and not well-defined specifications. In this case, we as a rule offer the time and materials model as the best for mutual settlements: a client pays for the time and effort spent on implementing certain project functionality.

Here’s a catch: Since there is no fixed project scope, we couldn’t provide a fixed development budget — all our estimates are approximate rather than precise.

On the flip side, it gives us flexibility. If a project estimate we got after the discovery stage is acceptable for our client, we’ll move on. If it’s not — we'll always offer them what functionality to curtail to cut the cost without sacrificing the product quality.

Project platforms and required specialists

After we’ve agreed upon the project scope and budget, we roughly understand what we need to do and what platforms will be involved in the project.

In 99% of the cases, we need a backend developer and someone from the front-end engineers.

For example, it can be only a front-end developer if we develop a website or a web app.

However, if there is a mobile-only project, we don’t need to involve a front-end developer. If we want to build a native iOS/Android mobile app in addition to a website, we’ll need separate iOS and Android developers.

The complexity and specifics of the project, number of platforms, business requirements, available budget, and deadlines — all define the size of a software development outsourcing team we pick for a particular project.

Here we’ll share what the Mind Studios’ fully staffed development team looks like:

• a project manager
• a business analyst
• a UI/UX designer
• a backend developer
• a front-end developer
• an iOS developer
• an Android developer
• a quality assurance specialist

Assembling a team

Good outsourcers always have several projects in progress at a time, and Mind Studios is no exception. When a new project comes to us, it means we need to plan it or put it in a pipeline with other projects.

At first glance, everything seems simple: look for the specialists who will be free first, and involve them in a new project. In practice, building the outsourced development team that will meet the project needs is not a walk in the park, and is a responsibility of a separate specialist — a resource manager.

Since each project ends up at different times, by default, our resource manager looks for those who will finish work first, but that’s not all:

• Grade of developers. Based on the input data about the new project’s complexity, the resource manager evaluates the level of tech savviness required for each specialist to handle the project.

  For example, if there is a complex system of integrations on the backend, we understand that we can’t involve a junior backend developer even if they are available sooner than a middle or senior backend developer. In this case, we need to provide the project with a middle or senior developer or, at least, provide a junior backend developer with a middle developer as a mentor.

• Workload revision. Sometimes, it turns out that required middle/senior developers are busy on other projects and free junior developers are incapable of taking on the new project.

  In this case, our resource manager's task is to split the required middle/senior specialists from other clients’ projects without breaking any schedules. This way, when our middle/senior developer gets free for a couple of hours a day, they could start on the most complex tasks of the new project while delegating simple, basic tasks to a junior developer.

• Development priorities. More often than not, the backend part of the project starts before front-end development. Front-end developers rely on the backend to do their part properly.

  So first, our resource manager needs to involve backend specialists in the new project. They start to gradually develop some basic things to give front-end developers something to work with later on.

Let’s summarize with the words of our COO Anton Shatalov about working with the Mind Studios outsourced teams:

“If a new project is complex, it doesn’t mean our client has to wait until one of our senior or middle developers is free from other projects. Neither it means our client will get only junior developers to work on their project just because they are free and can start on the project immediately. We always put a lot of effort into wisely picking up a combination of specialists with different levels of experience to meet specific project needs.”

Communication plan

After assembling outsourced development team members for the project, our business development consultant organizes a kick-off meeting or introduction call with a project manager (PM) and the client.

From now and on, the PM becomes the client’s main point of contact. PM starts to communicate with the client and for this, they compile a communication plan.

It is a table with answers to the following questions:

• How frequently will we have calls? — 3 times a week.
• What types of meetings will we have? — Sync-ups, retrospectives, daily standups, demos, etc.
• What are preferable tools for communication? — Google Meet, Slack, emails, phone calls, etc.
• What is the preferable duration for each type of meeting? — Every week we’ll hold a sync-up call within 15 minutes.

Thanks to the communication plan, the client, the PM, and other team members have a clear picture of how they will communicate, how often, how long, and what to bring with them for a particular meeting.

For example, we can agree upon the following: 1) at demo meetings, we’ll need to show the biweekly progress achieved; 2) after the demo meeting, we’ll need to send a follow-up email.

Status reports

From our side, we commit to sending weekly status reports, to keep our clients up-to-date regarding the project development progress. Status reports are drawn up according to the following template:

• We did 1), 2), 3),...
• We’re doing 5), 6), 7),...
• We’re testing 8), 9), 10),...

Status reports can be sent with different regularity: either weekly or at the client’s request.

Sprint reports

In the Agile methodology, the development process is split into sprints. According to the client’s needs and project specifics, sprints can last from one week to four weeks.

At the end of each sprint (usually, two weeks long), we make a report along the following lines:

“Dear client,
Within two weeks, we developed this functionality, figured out these bugs, and fixed them this way. We made 100% and we even have taken on an additional task. We have no roadblocks and are moving forward on time and on budget.”

Additionally, before sending this report, the Mind Studios team carries out the next sprint planning and shares it with the client.

The PM traces what tasks the team has completed and what tasks they left unfinished. Taking into account the team members’ sick leaves, vacations, days off, government holidays, and so on, the PM plans the following sprint. They distribute tasks for iOS, Android, backend, frontend, design, and QA departments among the available number of specialists.

Therefore, at the end of each sprint, the client has full information about how the last sprint was completed, what they paid money for, what the team plans to do in the following sprint, and what tasks remain in the backlog.

Support contract

We offer clients who outsource to our development team their projects to shift to a support contract after a successful product launch.

It implies assisting with any problems, drawbacks, bugs, or whatever else that can occur during the first month after the product release (a so-called post-launch stabilization phase). According to the support contract, our PM, backend developer, and QA engineer commit to responding to the client’s requests within the set period and help promptly fix the system.

Mind Studios’ success stories

Our approach to managing outsourced development teams has already been tested — and has demonstrated great results — over and over again. The most demonstrative are two projects, the James Butler delivery service for Denmark and the HWPO Training platform for Mat Fraser, a famous Canadian-American CrossFit athlete, each of which we delivered just in three months.

James Butler delivery app

When the company’s CEO Thomas Eriksson came to us to build a delivery app for Denmark, he set incredibly tight deadlines from the get-go. Our team needed to build two native apps for iOS and Android platforms for each of the two user roles — customers and couriers — in just three months. Thomas planned to raise substantial investments and needed to present the ready-made James Butler 4-app delivery system by a certain date.

Those three months were full of brainstorming sessions, challenge-solving decisions, and close cooperation with the client, the UI/UX designer invited by him to the project, and the managers from the Danish Bank. The latter was due to Denmark not supporting Stripe, which is our usual system for payments. The deliverables we presented to Thomas after three months of active development left him completely satisfied.

HWPO Training platform

This project appeared in our portfolio thanks to the recommendation from Leon Cassidy, our dedicated client for whom we built the Fitr.Training platform. The task was to develop a service similar to Fitr for Mat Fraser under his trademark HWPO.

Like the founder of the James Butler app, Mat Fraser asked us to release a project within three months. This time, however, it was a 6-platform system including backend, front-end part, and apps for iOS and Android platforms for each of the two user roles — coaches and athletes.

Despite taking our previous project Fitr as the background, we put a lot of effort into figuring out what features to delete and what to add by constantly analyzing Mat Fraser’s requests.

One more challenge was to think over the logic for introducing the new service to thousands of Mat Fraser’s established subscribers. We needed to make a shift to the new HWPO platform as easy as possible for them. And we did it so that it was enough for our client to post on his social media:

Thanks to adhering to a well-defined product roadmap, clear communication plan, and fine-tuned development process, we built the HWPO eco-system on time. And after its post-launch stabilization sprint, we’ve got honorable reviews from Mat Fraser’s team.

“In the world of IT, to check the upper capability limits of any system, you need to run stress testing. Projects like James Butler or HWPO that require developing multiple platforms within strict time frames of three months — they are stress tests that put our team through the wringer and make our business development consultants think twice before taking on similar projects. However, working under the extreme load enables us to verify our procedures of building and managing outsourced teams and ensure they work well.”

— Anton Shatalov, Mind Studios’ Chief Operating Officer

Tips for managing outsourced team members

Summing up all of the above and with the help of our project managers, we've got you covered with five core tips to make your experience in outsourcing a software development partner positive:

1. Compile a product requirements specification to ensure all stakeholders of the project development have a common view of what you’re going to build.
2. Discuss the preferable ways of communication with the team, the frequency and duration of the meetings, calls, etc. and map this out in a communication plan.
3. Reach an understanding of how the team will report on their progress before going into the project development.
4. Ask questions to confirm the team properly understands your requests, features’ logic, etc.
5. Ask the team to provide you with a call summary and decision log after each meeting.

So, outsourcing or in-house development?

We live in an increasingly digital world, and while this world offers us a multitude of creature comforts, it asks a lot in return. The easy availability of the internet everywhere allows for the truly magical perks of finding customers and selling things efficiently. But to do that, you need a well-developed platform.

Having an in-house software development team has its perks, as does outsourcing. Moreover, you don’t necessarily have to choose between outsourcing and in-house software development. Even Google outsources development to individuals and teams in addition to the corporation’s enormous in-house development staff.

At Mind Studios, we have full-stack development teams who can cover all sides of your product creation. We also offer separate services for business analysis, design, development, and marketing.

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